India Plans Second Phase of Strategic Petroleum Reserves Expansion

India plans to develop the second phase of its strategic petroleum reserve programme at an estimated cost of Rs 14,527 crore under a public-private partnership (PPP) model, with government viability gap funding capped at 60 per cent of the total project cost, the government said on Thursday.

The Phase-II expansion, approved in July 2021, will add 6.5 million tonnes of commercial-cum-strategic crude oil storage capacity through two facilities in Odisha (4 million tonnes) and Karnataka (2.5 million tonnes), Minister of State for Petroleum and Natural Gas Suresh Gopi said in a written reply to a question in the Lok Sabha.

The government is also continuously assessing new sites for establishing additional strategic petroleum reserves, the minister said.

Under Phase-I, India, through Indian Strategic Petroleum Reserve Ltd (ISPRL), has established strategic petroleum reserve facilities with a total capacity of 5.33 million tonnes at Visakhapatnam (1.33 million tonnes), Mangaluru (1.5 million tonnes), and Padur (2.5 million tonnes).

The facilities were commissioned between 2016 and 2018, and the quantity of crude stored in the caverns varies depending on prevailing market conditions.

"No Government Budgetary Support was provided for development and construction of SPR facilities under Phase-I. For development of SPR facilities under Phase-II, a public private partnership model is envisaged with a total project cost of Rs 14,527 crore with the viability gap funding (VGF) by the government capped at 60 per cent of the total project cost," he said.

"Further, assessment of new sites for establishment of additional SPRs is a continuous process."

Gopi said ISPRL has entered into an agreement with Abu Dhabi National Oil Company (ADNOC) permitting the UAE energy company to use a 750,000 tonne cavern at Mangaluru.

The two sides have also signed a non-binding memorandum of understanding on strategic collaboration, he said without elaborating.

The minister said to strengthen energy security and reduce supply risks, the government continuously monitors and assesses the threats, which can lead to potential supply disruptions to energy supplies.

"To strengthen energy security and minimise supply risks, India has significantly diversified its crude oil sourcing portfolio from 27 countries to 41 countries. Similarly, LNG sourcing has expanded from six countries to 15 countries. This diversification has reduced dependence on any particular country, region or transit route and enhanced India's ability to manage supply disruptions and market volatility," he said.

The Strategic Petroleum Reserves (SPR) facilities, he said, can act as buffer for short-term supply shocks.

"The government has also adopted a multi-pronged strategy to reduce the import dependency on crude oil which, inter alia, include demand substitution by promoting usage of natural gas as fuel/feedstock across the country towards increasing the share of natural gas in economy and moving towards gas based economy, promotion of alternate fuels like Compressed Natural Gas (CNG), Piped Natural Gas (PNG), ethanol, compressed biogas and biodiesel, refinery process improvements, promoting energy efficiency and conservation, efforts for increasing production of oil and natural gas through various policies initiatives, etc," he said.

Further, the government has been taking various steps to boost domestic oil and gas production and reduce dependence on crude oil imports.